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IT SERVICES

Annex Research 2000 Heptathlon: Global IT Services Leaders’ Results

Accenture Regains Gold

EDS and Cap Gemini Ernst & Young Tie for Close Second Place Overall

PHOENIX, May 11 - Accenture, formerly known as Andersen Consulting, put another accent to its 2000 business turnaround - it regained the “gold” medal for overall performance in the Annex Research 2000 global IT Services Heptathlon. 

Text Box:  EDS and Cap Gemini Ernst & Young (CGEY) finished in a close second place tie, only one point behind Accenture.  Computer Sciences Corp. (CSC) was fourth, despite its recent disappointing results (see “CSC Hits a Big Bump,” 3/26/01). 

IBM Global Services (IGS), the 1999 global IT Services Heptathlon winner, was fifth overall.  Last year was the first time ever that the IBM services unit had won the overall annual Annex Research competition, despite having become the world’s largest IT services company in 1995, when it grabbed the industry’s pole position away from EDS.  In 1998, IGS also won a special Annex Research award for the most balanced performance among the top IT services firms (see Annex Bulletin 99-16, 5/25/99).

This year, however, the world’s largest IT services company’s growth slowed down to less than 4% despite its surging new contract sales (see “IGS Growth Slows to a Trickle”, 4/12/01).  As a result, IGS had to be content with two silver and two bronze medals for a total of six points overall - enough only for a cellar position in the top five leaders contest.

Just to recap for our new readers the IT Services Heptathlon scoring… the overall medal standings are determined by awarding three points for a gold, two points for a silver, and one point for a bronze medal in each of the seven competition categories.

Overall 2000 Results

In earning this year’s overall “gold” in the IT Services Heptathlon, Accenture accumulated a total of 10 points. It won two gold, one silver and two bronze medals.  By contrast, last year’s winner - IGS - had 60% more points (16), and thus won the overall competition by a much wider margin.

The two companies tied for second place - EDS and CGEY - ended up with nine points , only one less than the winner.  Both earned two golds, and one silver and bronze apiece.

Revenue Growth (2 Medals)

The top five global IT services leaders’ combined revenue growth during the last decade was 18%, making it this industry segment one of the fastest growing areas in the information technology industry. 

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In 2000, however, the top five grew at only 15% rate, up from 10% aggregate growth in 1999, but down from 22% the year before (1998).

CGEY was a hands-down winner for last year’s growth with a 49% dollar-denominated growth rate (61% in euro currency).  CSC placed second with a 12% revenue growth, while Accenture won the bronze with a 10% business increase.

The gold medal winner for the 10-year growth category was CSC, which edged out IGS in a photo finish (each company recorded a 21% compound annual growth rate during the last 10 years).  Accenture again won the bronze with 17% annual increases since 1991.

Profitability (3 Medals)

After disappointing results in 1999, Accenture surged back last year as the IT services industry’s most profitable company.  It won two of the three gold medals handed out in this category - for pretax (10.0%) and net profit (6.5%).  CGEY earned the third gold - for the highest gross margin.

Accenture’s net profit margin gold was attained in tough competition.  The silver medal winner in this category - CGEY - reported a 6.2% net margin.  The third-place EDS won its bronze with a 5.9% net margin, while IGS was shut out of the medals even though it recorded a 5.7% net margin.  Only CSC, with its 2.9% net margin, lagged far behind the top four competitors.

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The pretax margin competition was just as tough.  The silver medal winner - EDS - was less than a point behind Accenture, and it edged out CGEY, which won the bronze, with a 9.0% pretax margin.  IGS was also close behind with an 8.1% pretax margin, while CSC ended up again at the bottom with a 4.4% score.

In the gross margin category, the variances between the top five companies were somewhat greater.  Accenture won the silver with a 29% gross margin, four points behind CGEY’s, while IGS earned its bronze with a 22% result.

Operating Expenses (1 Medal)

In the year 2000 belt-tightening competition, EDS came out on top, claiming the “gold” with a 9.2% operating expense-to-revenue ratio.  It was the only company to report a single-digit operating expenses as percent of revenue.

IGS won the silver with a 13.8% operating expense ratio, while CSC was third with 15.5%.

Sales Productivity (1 Medal)

EDS’s focus on more efficient sales effort was also reflected in its improved sales productivity (revenue per employee), the IT Heptathlon category for which this Dallas-based IT services company won the 2000 gold with $187,000 per capita revenue ratio.  CSC placed second, while IGS was third with $174,000 and $162,000 revenue per capita respectively.

SUMMARY

Overall, 2000 was the year of Accenture’s and CGEY’s recoveries, in which both companies gained ground, both in terms of growth and profitability.  It was also a year of continued improvements in EDS’s performance, a company close to the cellar only a few years ago, yet one which is now poised to vie for the gold in the 2001 IT Services Heptathlon competition.

Finally, 2000 was the year in which IGS and CSC both had some disappointing results.  As a result, IGS was dethroned as the IT Heptathlon gold medallist, while CSC’s recent results raise some questions about its sales competitiveness which will have to be answered in the remaining quarters of this year.

Happy bargain hunting!

Bob Djurdjevic






 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Volume XVII, No. 2001-11
May 11, 2001

Editor: Bob Djurdjevic
Published by Annex Research
e-mail: annex@djurdjevic.com

P.O. Box 97100,      Phoenix, Arizona 85060-7100
TEL: (602) 824-8111        FAX:

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